Strong demand for oil tankers should carry the shipping market into another banner year, reports Clarkson Research Studies, London.
In a recent report, it said shipping is enjoying a banner year. "The star is the tanker market. Earnings have doubled and over the summer tanker rates hit levels not seen for 30 years.
"We are cautiously optimistic. So far, tanker investment has been restrained and the order book is lower than it was 18 months ago. We think the fundamentals are strong enough to carry the market through another good year."
Clarkson said orders for ships of all kinds were 110 million dwt at the end of September, but construction may be peaking.
It noted that International Maritime Organization proposals may require 70 million dwt of single-hulled tankers to be retired by the end of 2005. Construction "will depend on how the tanker industry manages its investment over the next 2-3 years."
Between 2006 and 2010, it said, phase-outs would be below 5 million dwt/year. About 40 million would be retired between 2011 and 2013. By the end of 2014, all single hulled tonnage would be phased out and another 25 million dwt would be scrapped.
The report said since March, the average tanker has earned $28,080/day, twice the rate during the previous 6 months. It said modern very large crude carrier (VLCC) earnings are up 147% in the period. VLCCs of 1970s vintage were earning $39,762/day. It said the product tanker market also has risen strongly.
It said the estimated rate for a modern VLCC was $43,000/day at the beginning of September, 60% above the average for the 1990s and 54% higher than its level just 6 months ago.
Clarkson said, "The overall outlook for tanker demand remains positive. Global economic growth is expected to slow slightly in 2001 but nonetheless remain strong. Oil demand is expected to increase 2.4% and there appears to be ample supply as producers continue to increase output."
It said as of Sept. 1, the tanker fleet was 290.4 million dwt, of which 1.7 million was laid up and 5.4 million was used for storage.
"Although this year has seen a heavy delivery schedule, the order book has increased to 46.7 million dwt, or 16.1% of the fleet. Another 6.4 million remains to be delivered by the end of 2000."
Clarkson said the fleet is expected to grow 2.3% to 293.2 million dwt this year. The forecast was raised after the improved freight market reduced scrapping rates.
It said the VLCCs were the most heavily ordered tankers this year, with construction of 26.3 million dwt, or 21% of the VLCC fleet, on order.
"While there is still a considerable amount of tonnage yet to be delivered this year, the order book for 2001 delivery is smaller. In addition, 22 million dwt will reach the age of 25 in 2001. Fleet growth for next year is therefore forecast at just 0.6%," the report said.